Palin to unveil Railbelt power plan

Centralized authority is best hope for energy affordability, study says

Posted: Sunday, February 22, 2009

By DAN JOLING

ANCHORAGE - Gov. Sarah Palin has high hopes for a multibillion dollar natural gas pipeline. One of her other legacies could be shaping the systems that let most Alaskans flip on a light switch.

Palin by the end of the month will propose a bill taking the first steps toward forming a state corporation to oversee power generation in the Railbelt, home to 65 percent of Alaska's population.

The Railbelt is named for areas touched by tracks of the Alaska Railroad: Anchorage, Fairbanks, the Mat-Su and the Kenai Peninsula. Six independent utilities now power the region. An $800,000 state study overseen by the Alaska Energy Authority suggests it's time for a more efficient management model.

The best hope for future affordable rates, according to the study, is a centralized authority with the financial muscle to build efficient power plants, coordinate power generation between all facilities and send electricity over a reliable power grid.

Doing nothing is not an option, according to Palin, who last month said the days of living off cheap natural gas and generous state subsidies are ending.

"We've known for some time that this system is not sustainable," Palin said.

Railbelt generating plants are wearing out. Nearly half the existing generation capability is scheduled to be retired in 15 years.

Also, Cook Inlet gas that has helped keep rates low is drying up. Reserves owned by Anchorage Municipal Light & Power are declining. Favorable gas contracts held by Chugach Electric Association, which supplies power to Matanuska Electric, Homer Electric, and to a lesser degree, Golden Valley Electric, are ending.

The challenges and a recommendation are outlined in a 257-page report by consultant Black & Veatch, an international engineering and construction company. The Railbelt Energy Grid Authority study was released in September.

Future power plants

The report estimates new generation and transmission facilities will cost $2.5 billion to $8.1 billion or more. Hydroelectric would cost more up front and a coal-burning plant less. The report estimates that rate-payers collectively could save $40 million annually with a regional corporation, in part because of the state's tax-exempt status for borrowing the money.

None of the six utilities is big enough to pull off a hydroelectric plant on the Susitna River, a gas fired turbine at the end of a North Slope "bullet line," or a massive coal-fired facility, according to the consultants.

If natural gas were available in all areas, the utilities probably could continue to operate with decentralized power plants, said the Alaska Energy Authority's Jim Strandberg.

Railbelt grid

There has been little incentive for individual utilities to invest in the power grid, said former state Rep. Norm Rokeberg, R-Anchorage, who sponsored the bill for the REGA study and who backs its recommendation.

"The grid never seemed to gain the priority for capital investment that was needed," he said.

A state corporation has other benefits, Strandberg said.

"You avoid duplication of manpower, you're able to create a better technical work force, so you don't have meter shops with each utility, for example," Strandberg said.

The new corporation could coordinate generation sources, scheduling how much power each unit put out, holding back water behind a dam when a wind farm elsewhere was operating at full capacity.

"You can come up with much better economics if you can intelligently operate these units together," Strandberg said. "Currently, we can't do that."